Day Trading Education: What and When to Buy

Day Trading Education: What and When to Buy

Day trading is not easy, that’s a true statement. It requires a lot of energy and a lot of discipline. If you can do it right, you can benefit from huge amounts of profits. However, if you somehow failed to do it right, then you’ll be losing a lot.

The first step to proper day trading is to know what stocks or other assets to buy. After you determine such thing, you have to know the precise moment when to do it.

In this article, we’ll tackle the Top 10 Forex Brokers things you need to focus on when buying an asset as well as the conditions to look for when doing that.

What to Look For

As a day trader, what you aim for is to make money by taking advantage of the small price fluctuations in individual assets like stocks, currencies, commodities, etc, through the day, while taking advantage of the power of leverage.

When you’re not sure where to focus, consider the following Finance Brokerage FSMsmart Review factors.

Liquidity

Liquidity refers to the ease at which you can convert an asset into cash. High liquidity makes it easy for you to enter or exit a trade at a reasonable and good price. And a “good price” means a tight spread, which meanwhile refers to the price between the bid and ask price. You also want to look for low slippage, which is the difference between the expected price of a trade and its actual price.

Volatility

Volatility is a trader’s friend as long as that trader is very much careful with his trading steps. This simply refers to the expected daily price range, which in turn pertains to range in which you will have to operate. Keep in mind that higher volatility means either greater loss or greater profit.

Trading Volume

This one refers to the number of times a stock or another asset is bought and sold in a certain timespan. The time period that is measured is typically within the day of trading, which we will also call the average daily trading volume.

When to Enter a Trade

After you have already figured out what to buy, you now have to decide when to do exactly just that. In other words, you need to spot entry points, which is the precise moment when you’re going to enter a trade.

You should consider the following:

News and Updates

News affects all kinds of assets’ movements. The news that you hear can either make or break the trend in the asset’s price movement. That means it’s very much recommended to always be in the loop all the time. You should always be updated and keep close tabs for potentially market-moving news.

ECN/Level 2 Quotes

ECNs are computer-based platforms that show the best available bid and ask quotes from many market participants. This automatically matches and executes orders.

Meanwhile, the “level 2” is a subscription-based service that provides real-time access to the Nasdaq order book composed of price quotes coming from market makers that are registered in each Nasdaq-listed and over-the-counter Bulletin Board securities.

Add comment